[Part 1 of the Delta Paradox blog series I started last month can be found here.]
There are three areas that need to be looked at in order to successfully navigate a business ownership transition. Another way to think about it is as a three-sided structure, a triangle or delta—the symbol for change. The areas are:
- Your personal financial plan
- A business ownership execution program
- Your life transition plan
I suggest you need to make all three legs of your transitions plan as strong as possible. Here are a few tips on each leg of your triangle:
- Do you have your own financial adviser? No? Well, how many doctors do you know who perform major surgery on themselves? When you start to build your own financial plan, hire the best planner you can find who isn’t you. Sure, they might not do things exactly the same way you do, but if you use the same “touchstones” that define what makes you great, then you’ll find someone you’ll eventually really enjoy working with and who you trust—just like your clients trust you!
- How do you start on the ownership transition program? Get an independent valuation of your business from a competent valuation expert with experience in dealing with financial advisory firms. You need a valuation that will stand up to IRS challenge and give a firm basis for financing if needed. This is not something your local CPA usually is trained to do. Firms like Moss Adams, SparData and FP Transitions are a few examples of business valuation firms. Your valuation will give you a benchmark—a reality check—as to what your company or transferable book of business is likely worth in the marketplace.
- What’s a life transition plan? When you are in the process of selling your business, many changes will hit you—some unexpectedly, some planned. Each change, real or imagined, will tug at your anchor to a fixed point of reference. Your life after the sale will be very different than it is now. Questions and doubts will arise as to your personal identity, value and purpose in the years ahead.
- What are your values-based intentions for your clients, your staff, your successor and yourself?
- Do you really have a clear vision of what you want to do with your talents and energy in your new life?
- What do you truly want?
You may need to engage a qualified life coach or transitions coach to guide you through this unique period.
Over 50 percent of all intended ownership transitions fail somewhere along the way. The reason is usually not because of the financial plan or the ownership transition program. It’s the human emotions and dynamics that get stirred up by change that kill the deal. Don’t let yours be among this number.
Sam Hull, CFP®, CPCC, ACC, RLP
Whitewater Transitions LLC